What happens to the oil sector if the current tensions in the Persian Gulf between Iran and the west escalate?

The immediate reaction is to say oil shares would move sharply higher, lifted by an expected surge in the crude price if the dispute worsened. But any rises were unlikely to be uniform across the sector, said analysts at HSBC, with companies less exposed to the region expected to perform better.

In any case, HSBC said it was not clear what Iran's next move would be:

We think it is relatively unlikely that Iran will attempt to interrupt the 15-17m barrels of oil a day that transits the Straits of Hormuz as this would cause severe damage to its own economy.

There is, however, always the risk that Iran views acts by Western governments as provocation and seeks to prevent shipping from transiting the Straits. We assume that such an act, should it be seen by the US as unlawful, would be countered, possibly by force.

We would hope that any such interruption would be temporary but even so, oil (and gas) prices are likely to spike should shipping be affected. (After the Iraqi invasion of Kuwait in 1990, prices more than doubled over a three-month period before declining to pre-crisis levels.)

With Qatar accounting for around 20% of global liquefied natural gas (LNG), we would expect non-US spot gas prices to spike too.

On the basis of their exposure to the region, HSBC has an overweight recommendation on BP, up 1.15p to 500p, and BG, 10.5p better at £15.29. But it is neutral on Royal Dutch Shell, whose A shares are up 2p at £22.83. The bank said:

High oil and gas prices tend to be positive for the sector in relative terms, but the stocks we have under coverage have markedly differing exposures to the Persian Gulf. Oil-sensitive stocks such as BP and BG have little or no exposure. BG would also be a potential beneficiary of higher gas prices given its LNG portfolio.

In contrast, Shell has material exposure to the region, most notably to Qatar. We estimate that Shell's Persian Gulf assets have a net present value of around $42bn (around 440p a share), equivalent to 19% of its market capitalisation.